Stocks are set to finish higher on the day even though trade concerns persist. 

Europe

It was been an impressive turnaround seeing as the major indices were offside this morning, and traders seem to have shrugged off the negative sentiment. Tensions between the US and China, and the US and Mexico are still high - the highest they have been recently, so today’s move might turn out to be a relief rally, as the political standoff continues. President Tump has kicked off his UK visit and some traders will be keeping an ear out for any comments about the future of UK-US relations, and some dealers are nervous the US President might try his tough tactics on Britain. 

Kier Group has warned that underlying operating profit will be £25 million below the old guidance, and the group cautioned about its debt position too. The construction group complained about ‘volume pressures’. The sector as a whole has found trading tough in recent years, as it was a race to the bottom in terms of bidding for contracts, and many firms spread themselves too thin. Given the enormous drop in the share price today, the company might want to consider an overhaul of its business, and investor confidence is likely to remain low for the medium term.

Infineon confirmed it will take over Cpyress Semiconductor for €9 billion. Infineon’s stock has been suffering recently as the group lowered its revenue and profit forecast in March, and the Huawei-fight in the US has hurt many firms in the wider sector. The Germany-listed group anticipates to make cost saving of €180 million per year until by 2022. In light of the volatility in the industry, any hiccups in the acquisition or further lowering of the guidance is likely to hit the stock hard.

Metro Bank shares are in the red today after it was reported over the weekend that the group has stopped issuing loans for commercial property, and that department accounts for about a third of the bank’s loan book. It appears the finance house is taking on less risk, and this comes at a time when the bank is being investigated for alleged securities fraud. Last month, the group reported disappointing results as net profit halved, and net interest margin ticked lower. The stock price has been subdued recently and it suggests that traders are still wary of the group.  

US

The NASDAQ 100 is firmly in the red as Google’s parent, Alphabet are down on the day over talks that the firm is set to be investigated in an antitrust probe. The tech sector remains in the firing line of the trade dispute of between the US and China, and that is a contributing factor too. The broader S&P 500 is showing minimal gains as short covering in the wake of the recent sell-off kicked-in.

Alphabet, shares have been hit as there is talk the Department of Justice (DoJ) is prepping its antitrust probe into the search engine, Google. It was reported that the government body will analyse the search engine, and there is chatter the firm’s advertising practices will be investigated too. Facebook shares are lower too over tighter regulation fears.

Fedex shares are a little lower today after China accused it of deliberately diverting packages that were bound for Huawei’s offices in China, to the US. The Chinese government are investigating the issue, and given that Huawei is now at the centre of the US-China trade spat, Fedex could be engulfed by the trade war too. The US parcel delivery company claims it was an error, while Beijing said they welcome foreign firms in China as long as they comply with the law.

The final manufacturing PMI report for May was 50.5, which was a slight revision down from the soft initial reading of 50.6. The ISM manufacturing update came in at 52.1, and it was the slowest reading since late 2016.

FX

There has been a broad sell-off in the US dollar index as concerns about the economy cooling, and the trade spat with China have hit the currency. 

EUR/USD has been lifted by the softer greenback. The major eurozone countries issued their final manufacturing PMI reports for May, and the updates were subdued. The Italian report remains in contraction territory as the reading was 49.7, and the French and German reports came in at 50.6 and 44.4 respectively – both met forecasts.

GBP/USD is a touch higher even though the UK manufacturing PMI report for May was 49.4 – the first month of negative growth since just after the EU referendum. In early 2019, the manufacturing sector had a busy run, but there was speculation that was down to stockpiling ahead of the UK’s planned departure from the EU in March, and now it appears stockpiling was taking place.

Commodities

WTI and Brent crude are higher today after Saudi Arabia suggested that OPEC and its allies might push to keep production curbs in place. Given how much oil has dropped in recent weeks in light of the trade-related sell-off, the energy market has seen some bargain hunting today.

Gold has extended its gains the risk-off attitude of dealers has driven the metal to its highest level since late March. The commodity is taking advantage of the softer US dollar too, and the inverse relationship between the two markets continues to be strong. A break above $1,324, might put the $1,340 mark on the radar. 

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